Who is Treasurer of Australia? Is it Josh Frydenberg? Chris Bowen? Who knows? You can’t tell from the media release issued by Frydenberg yesterday in response to the appalling national accounts data for the March quarter.
It’s a remarkable statement — remarkable, that is, for its complete disengagement from any sense that Frydenberg might actually have any role in what’s going on in the economy. It reads like an analyst who’d cut and pasted from the ABS’ press release for his clients, reeling off statistics without any reflection that this man has been in charge of the economy for ten months and his government has been running the show since 2013.
How bad was the March quarter? GDP only rose because of the unlikely combination of floods in north Queensland in February, a hailstorm in Sydney in December, a dam wall collapse (and the loss of nearly 300 lives) in Brazil, and the continuing expansion of the NDIS. The 0.4% quarter-on-quarter growth meant annual GDP fell to 1.8% from a revised 2.4% in the December quarter. Forget 3% growth, we’re not even managing 2%.
We haven’t done as badly as this since the financial crisis.
The 0.2% contribution to growth from government spending “was the main contributor to growth reflecting ongoing delivery of services in disability, health and aged care”, according to the ABS. That’s what has been driving labour market growth in the past three years — health and social care spending, not robust private sector expansion. What other growth there was was driven by disasters and their subsequent impact. That windscreen-wrecking storm in Sydney and floods in north Queensland triggered billions in insurance payouts to households — and they won’t contribute to growth this quarter.
The rise in our terms of trade and the contribution to growth from net exports are linked to the January 25 mine dam disaster in Brazil that has pushed iron ore prices above US$100 a tonne globally. If it hadn’t been for that disaster and its impact on Brazilian iron ore exports (our major competitor in China), iron ore prices would have struggled to remain around their end of 2018 levels around US$72 a tonne.
Otherwise, the economy has hit a wall — a wall built, brick by brick, by this government and Australian business over the last six years. That wall is wage stagnation, the deliberate policy of the Coalition. The 1.2% improvement in compensation of employees in the national accounts was only due to the growth in the labour market; average compensation per employee, one of the favoured measures for the Reserve Bank, was up by just 0.4% in the quarter or 1.4% over the year. That’s even below the wage price data of 2.3% year on year in the March quarter, which has been static now for nine months.
The government’s wage stagnation policy is why household consumption cratered for yet another quarter: a tepid 0.3% expansion in household consumption in the quarter brought annual growth to just 1.8%, down from 2.2% annual growth in December. Households “reduced discretionary spending, in particular on recreation and culture, hospitality and furnishings and household equipment”, the ABS said. And right after the Productivity Commission outlined how Australia is in the grip of another — and this time real — productivity crisis, productivity declined by 0.4% in the March quarter and is down by 0.9% over the year.
“The economy does face international and domestic challenges,” Frydenberg finally admitted near the end of his recitation, as if jolted from his reverie into realising he was actually in charge. Yes, indeed, international challenges — there is Donald Trump’s attempt to completely wreck the international trade system, which Australia heavily relies on, and which we have said nothing in defence of as the world drifts toward a trade war.
But Frydenberg also has the “challenge” of having our terms of trade go up even higher after another increase in iron ore prices, pumping extra billions of tax revenue into Treasury.
As for “domestic challenges”, they are entirely within Frydenberg’s control. For six years, his government has demonised unions, established ideologically motivated regulators to attack them, opposed minimum wage rises, pushed for penalty rate cuts and endlessly insisted wages growth was picking up when it was flatlining. The impact on households compared to the end of the Labor years is clear from the ABS documents.
A small tax cut for middle income earners — literally the only current economic policy this government has — isn’t going to do much against what is going to be a decade of wages stagnation. And the economy is simply going to continue to hit the same wall that Frydenberg and co have spent six years building.
I heard some ABC radio blather the other day suggesting that CEO confidence is quite upbeat…so obviously the reptiles who are keeping wages growth in a coma are still getting their bonuses.
Fraudberg appeared in 7:30 the other night, bragging about being a member of the “pro-growth government” ….. which has been in “power” for six years now, with the results it’s had = a failure by it’s own standards?
Then he wants to whine about “how bad things would be under Labor” – how good’s his predictions in his own job been?
What a BS artist.
A large percent that voted Coalition did so they said because the Coalition were better at managing the economy and they were concerned about the economy! The parrots were parroting what they read in the Coalition/Murdoch media releases. Idiots.
Chickens are coming home to roost Josh …. think “The Birds”?
I bet the ex Deutsch bankster didn’t mention he moved his super to industry super!
Did the Libs plant a time bomb thinking Lab would win?
Now it’s blowing up in their face.
BTW. I thought they had stopped the boats. Didn’t seem to hinder Three Chinese warships that appear to have arrived unexpectedly. Scumo says he knew they were coming others are expressing saurprise.
Abbott and Morrison kept the boats going by refusing to support Gillard’s Malaysia solution. The boats dramatically reduced in number when Rudd announced that no boat arrival would step onto Australian soil. So he started the stopping of the boats and the boat turnarounds of the current government have kept them away.
yep – i think the idea was to have the reverse outcome – setting up Labor for a horror 3 year term then blow them out of the water at the next election. In the last days I thought Morrison was starting to run dead – but like Howard he looked in the mirror and believed he was the one and went out there again and again in the final days and brought home 76 kilos of rancid bacon. Sucked in ScumMo. You can’t blame anyone but your grifter govt for the abyss that’s coming…
But it’s all ok Bernard, because the evil NSW Labor Party is nowhere near government.
Isn’t that your standard political line?
No, it’s the standard line of the ICAC decimated Coalition.
If only the media did its job of reporting the facts and their implications , then there are more than enough opportunities to put pressure on the government and then maybe we will see some of these security laws changed to be more suitable for our democracy. If the media continue to just print press releases and not do your job then you cannot complain about the resultant mess. This is a war on our democracy, fight with all that you have.